A1491
Title: Volatility spillover among Japanese sectors in response to COVID-19
Authors: Hideto Shigemoto - Kwansei Gakuin University (Japan) [presenting]
Takayuki Morimoto - Kwansei Gakuin University (Japan)
Abstract: The aim is to clarify how risks spread across economic sectors and indicate the sectors that are most affected compared to the others in order to help investors with asset allocation and support them in risk management. Although the Japanese stock market is one of the relatively large stock markets in the world, there have been no studies on volatility spillovers among its sectors. The volatility spillovers among 17 sectors classified in the Tokyo Stock Exchange are examined by using the forecast error variance decomposition of the vector autoregressive model. The results show that the pattern of volatility spillovers across sectors in the Japanese stock market differs between the pre-COVID-19 and the during the COVID-19 period. While energy resources and bank sectors are risk receivers in the pre-COVID-19 period, these sectors are risk transmitters during the COVID-19 period. We also find that volatility spillovers in the Japanese stock market are mainly driven by negative realized semi-variance. These results are useful for asset allocation and risk management.
